W’Bank task CBN on monitoring of Int’l banks | Independent Newspapers Limited
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W’Bank task CBN on monitoring of Int’l banks

Posted: Apr 16, 2015 at 1:12 am   /   by   /   comments (0)

By Sola Alabadan


The World Bank Group, in a new report launched on Wednesday, challenged the Central Bank of Nigeria (CBN) and its counterpart within the West African sub-region to step-up monitoring activities of their banks doing business across the sub-region, to ensure financial stability in the region.

The World Bank in its Global Financial Stability Report (GFSR) released during its ongoing Spring Meetings holding in Washington, U.S, particularly noted that “African banks have also become lead arrangers for syndicated loans, filling the gap left by European. From a home country perspective, the geographical expansion of pan-African banks increases diversification and provides further growth and profit opportunities for banks.”

The 2015 GSFR noted the expansion of Nigerian banks across the continent, even in rural areas, warning however that “as these groups have developed in reach and complexity, significant supervision gaps, governance issues and questions about cross-border resolution have emerged that could pose risks to national and regional financial stability if unaddressed.

“With their rapid expansion, the largest pan-African banks have become systemically important in many of their host countries, raising concerns about spillover risks,” the report added.

“Most groups conduct their foreign operations through subsidiaries, which rely on local deposits for funding, somewhat mitigating potential contagion. However, with limited information about intragroup exposures and interconnections within pan-African banks and cross-border cooperation between supervisors just emerging, undetected risks could be mounting. In addition, pan-African groups have become more complex, encompassing nonbank activities that could give rise to additional contagion channels.”

The face of African finance, the GSFR said, is changing rapidly with the strong expansion of pan-African banks across the continent in recent years.

“Reflecting a number of converging push and pull factors and aided by improved political and macroeconomic stability and robust economic growth, the number of operations of the seven largest groups has more than doubled since the mid-2000s. Specific factors contributing to this expansion include increasing trade linkages between African countries, which have induced banks to follow their clients, and the declining role of more traditional players such as European banks.

“The growth of pan-African banks offers a number of opportunities and benefits. Anecdotal evidence suggests that the expansion of these banks has improved competition and given rise to economies of scale, especially in host countries with small local markets.

“Pan-African banks are driving innovation, offering opportunities to enhance financial inclusion, and in some cases contributing to lowering borrowing costs. For example, in the East African Community, Kenyan banks have introduced innovative business models such as agency banking into neighbouring countries,” the report added.

Nigerian banks with international operating licences include: First Bank, Zenith Bank, Guaranty Trust Bank, United Bank for Africa, Diamond Bank, Access Bank and Fidelity Bank, among others.

Meanwhile, the CBN has accused some banks of still rendering returns on the Micro Credit Fund (MCF) to the apex bank more than five years after discontinuation of the scheme.
In a letter to all banks titled “Cessation of Rendition of Returns on Micro Credit Fund” signed by Director of Banking Supervision, Mrs. Tokunbo Martins, defaulting banks were directed to stop forthwith, the rendition of this return to the CBN.
The N50 billion Micro Credit Fund (MCF) was established in 2008 by the federal government in conjunction with the CBN as part of efforts to eradicate poverty by empowering the micro finance sector, such that they give money to the financially needy.

The MCF was set up to enhance the flow of funds to micro enterprises in response to the shortcomings of the Small and Medium Enterprises Equity Investment (SMEEIS). The Fund was designed primarily to replace SMEEIS and its take off seed money of N22 billion was the unutilised portion of the SMEEIS Fund as at December 31, 2007.
The operational funding of the scheme was supposed to be a partnership between the banks and state governments. This was not the case as both parties paid less attention to the scheme.



Under the Fund, banks were required to set aside five per cent of their profit after tax for micro credit lending.
The letter reads in part: “the Micro Credit Fund (MCF), which had been in operation since February 8, 2008 was discontinued through the decision reached at the 298th Bankers’ Committee Meeting of March 15, 2010.
“This decision was borne out of the fact that after two years of its existence, deposit money banks were not forthcoming in their contributions to the fund and in the same vein, only few states responded to the programme.
“Consequently, the Bankers’ Committee decided to discontinue its operations.
We however, observed that some banks still render returns on MCF to the Central Bank of Nigeria more than five years after the discontinuation of the scheme.
“Banks are hereby directed to stop forthwith, the rendition of this return to the CBN.”
In the guidelines setting up the MCF funds, it is required of them to “Put in place appropriate institutional arrangements for disbursing and recovering the amount to be accessed, which shall be confirmed by the Central Bank of Nigeria; show a commitment to supporting small and micro enterprises through setting aside a counterpart fund equal to the amount of the loan being sought.
But two years after it was set up, the Fund could not take off due to apathy on the part of state governments and reluctance of the banks to part with their money. Consequently, nobody or micro enterprise benefited from the scheme.